Former Wall Street Trader: ‘There’s No Other Industry Where You Could Get Paid So Much For Doing So Little’
"Former Wall Street Trader: ‘There’s No Other Industry Where You Could Get Paid So Much For Doing So Little’"
One of the problematic developments for the U.S. economy in the last several decades has been increased financialization. In the 1950s, the financial sector made up less than 3 percent of the economy. Today, it is back to its pre-recession heights of more than 8 percent. The financial sector accounts for about 30 percent of total corporate profits, which is actually down from before the financial crisis, when it made closer to 40 percent.
Increased financialization is of dubious societal use; as former Federal Reserve Chairman and big bank critic Paul Volcker has said, “I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.” (Volcker has opined that the last useful bit of financial innovation was the ATM.) At the same time, the industry is one of the highest paid. In a new piece in New York magazine, a former Lehman Bros trader explained that, in his view, “there’s no other industry where you could get paid so much for doing so little“:
Many [on Wall Street] acknowledge that the bubble-bust-bubble seesaw of the past decades isn’t the natural order of capitalism—and that the compensation arrangements just may have been a bit out of whack. “There’s no other industry where you could get paid so much for doing so little,” a former Lehman trader said.
The Great Recession destroyed nearly $20 trillion in wealth, and total family wealth is still down $15.1 trillion (in 2011 dollars) from its last peak. And there’s very little that the financial industry can point to that could possibly be worth that cost. To the contrary, as Nobel Prize winning economist Paul Krugman has pointed out, the era of “boring” commercial banking — when strict regulations kept investment banking and commercial banking separate — “was also an era of spectacular economic progress for most Americans.” (HT: Jillian Berman)